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Campbell's Soupy Sales

The 134-year-old company innovates to stay ahead.

If Campbell's(NYSE:CPB) first-quarter results are any indication, opening a can of soup, pouring it into a saucepan, adding some water, and heating it is simply too much work for us today. I remember when those red-and-white condensed cans symbolized convenience (and to Andy Warhol famously symbolized the mundane elevated to art). But today, cooking up some Campbell's apparently seems as time-consuming as baking from scratch.

In the face of flagging demand and increased competition from General Mills'(NYSE:GIS) Progresso brand, Campbell has adjusted. It's introduced microwaveable bowl versions of its Select and Chunky lines of ready-to-eat soups and launched the "Soup at Hand" sippable line. In this quarter alone, it produced 11 new varieties of "Soup at Hand," and four new Select and six new Chunky microwaveable soups. Campbell wants to make it as easy as possible for consumers to enjoy some hot and tasty soup anytime, anywhere.

Campbell is meeting this goal, but has yet to find a way to spice up demand for its old-school offerings. Sales of its ultra-convenient sippable and microwaveable products have been increasing steadily, while traditional condensed soup sales are declining. In its first quarter, U.S. shipments of Campbell's condensed soups dipped 7%, while shipments of ready-to-serve products rose 6%.

The company's microwaveable soups are so popular, in fact, that demand is outstripping supply. Campbell is trying to ramp up production to meet the unexpected onslaught.

Despite strength from these products, and from its other divisions (sauces and beverages, biscuits and confectionery, international soups and sauces), Campbell warned that its second-quarter earnings will fall short of expectations. We're getting into what it dubs the "soup season" now (what the rest of us call "winter"), and the company expects a heavily competitive and promotional environment. That means it will have to use price cutting and special sales to battle Progresso, and those moves will cut into profits some. It left its full-year estimate unchanged, however.

In the long term, Campbell remains convinced that it can turn the condensed soup segment around -- by improving quality, adding easy-open lids, introducing new flavors, and continuing the rollout of its gravity-fed shelving distribution system. Shareholders will have to stay patient here, and trust the company. In the meantime, Campbell has its other segments and its microwaveable and sippable soups to give it a boost.

Author

LouAnn Lofton has been a writer (among a few other things) with The Motley Fool since January 2000. She's the author of the Fool's "Warren Buffett Invests Like a Girl: And Why You Should, Too," published in June 2011. You can follow her on Twitter via @LouAnnLofton.